| Abstract
| - Background: In the decade after 1983, the annual growth rate of drug expenditure was about four times as high as that of per capita gross domestic product (GDP) in Shanghai. In 1993 and 1994, a drug list policy and hospital revenue capping policy were introduced in Shanghai to contain drug expenditure. We studied the impact of these two policies, as a model for similar policies in other parts of China and elsewhere. Methods: Quarterly drug expenditure data were collected from 1992 to 1996 and more detailed drug expenditure flow was obtained at seven selected hospitals. Twelve focus group discussions were organized to obtain opinions from all stakeholders. Results: The research findings showed a dramatic and continuing decline in the growth rates of total medical and drug expenditures after the implementation of the two policies. The proportion of total medical expenditure attributable to drugs declined from 67% in 1992 to 51% in 1996. The annual growth rate of drug expenditure per ambulatory visit and per bed-day was reduced as well. Drug revenue as a proportion of total hospital revenue declined gradually in all seven hospitals. The two policies did not alter the equity of drug utilization between the insured and non-insured. The government, insurance authority and state-owned drug enterprises all favoured the new policies, while hospital administrators, professionals, joint venture and foreign manufacturers wished for the reimbursement mechanisms to be improved, for retention of their freedom of choice, and for the drug list to be further expanded. Conclusions: The drug list and capping policies in Shanghai appear to have achieved their objectives of containing the escalation of drug expenditure and improving the rational use of drugs without loss of equity. The underlying causes of the escalation of drug expenditure in China need to be further elucidated.
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